First Party and Third Party Bad Faith — What’s the Difference?

If you believe that you have been wronged by your insurer in Florida, you may be entitled to bring a bad faith insurance claim against them and thus recover compensation for the losses you suffered. In Florida, insurers have a duty to their policyholders to act in good faith in settling claims, and to act fairly and honestly (with due regard for the policyholder’s interests) when doing so.

Bad faith insurance claims can be either first-party or third-party. Policyholders who are new litigants may be unfamiliar with insurance litigation at-large may recognize the terms “first-party” and “third-party” in the bad faith insurance lawsuit context, but may not be entirely familiar with the differences between such claims.

Let’s take a brief look.

First-Party Bad Faith

First-party bad faith insurance claims are brought pursuant to section 624.155 of the Florida Statutes (which, incidentally, has additional procedural requirements that include giving written notice of the purported violation of good faith within 60 days of the violation). Essentially, a first-party bad faith insurance action is brought by the policyholder against their insurer on the basis of the insurer’s wrongful denial, delay, or underestimated payout of your submitted insurance claim.

For example, suppose that you are covered by private disability insurance, and you suffer an injury that renders you physically disabled and unable to work. You subsequently file an insurance claim for disability benefits, but your insurer denies your claim. If you can show that the insurer wrongfully denied your claim, then you may have a legitimate first-party bad faith insurance claim to litigate. With the aid of an attorney, you can revise and resubmit your application, challenge the denial of benefits through an administrative appeal, or (if the appeal fails) pursue litigation in the Florida courts.

Third-Party Bad Faith

Third-party bad faith insurance claims may be brought pursuant to section 624.155, or pursuant to common law. A third-party bad faith insurance claim is quite a bit different than a first-party bad faith insurance claim. Fundamentally, a third-party bad faith insurance claim may arise when you — the policyholder — have been subjected to a lawsuit, and the insurer has stepped in to defend the action on your behalf. In litigating your defense, the insurer must act with due regard for your interests. If the insurer fails to properly defend the claim or otherwise reach a settlement within the policy limits of your insurance coverage, you could be held personally liable for the excess damages. In such a scenario, you might legitimately assert that the insurer failed in their duty of good faith to act in your interest, and thus exposed you to substantial damages as a result.

Have you had your insurance claims wrongfully denied, delayed, or otherwise interfered with by the insurer? Alternatively, have you been sued by a third-party and your insurer failed to reach a settlement within the policy limits, thus exposing you to personal liability? You may be entitled to bring a first-party or third-party bad faith insurance claim against your insurer, pursuant to Florida law. Proving that the insurer violated their duty of good faith can be challenging, however, and in the state of Florida, there are also a number of procedural details that you’ll have to keep in mind as you move through the process. As such, it’s important that you work with a qualified Florida attorney who has a track record of litigating bad faith insurance claims on behalf of various policyholder clients.

Ver Ploeg & Lumpkin is an insurance litigation firm with offices in Miami and Orlando. Our attorneys have represented policyholders throughout the state in complex insurance disputes for over two decades, including those involving first-party and third-party bad faith claims. We are committed to providing legal representation that is tailored to the specific needs of our clients, and to that end, we work closely with clients from beginning-to-end of the litigation process to ensure that their objectives are being met at each and every stage.

Call (305) 577-3996 today to speak with an experienced Miami bad faith insurance attorney here at Ver Ploeg & Lumpkin. During your initial consultation, your claims will be assessed and our attorneys will help you develop a strategic roadmap for litigation.